It’s Probably Nothing

QE4 is well underway…

… orderly markets are contained globally.

While the market as a whole is treading water, some software names continue to get beaten down. And some of the “pilot to copilot, we goin down in flames” names have seen their sharpest reversals in decades.

PETS recently had its biggest one-day gain in 17 years, up about a third the day after beating expectations. That’s a proper short squeeze.

The company reported earnings of 33 cents per share, while analysts were expecting earnings per share of 26 cents, according to Refinitiv. PetMed has missed estimates the last three quarters.

Markets being what they are, one might expect some other names in the same category to go up on the positive news. Maybe Chewy (CHWY) goes down due to this showing an existing competitor still has a bit of strength, but what happens to a fellow poorly performing company in the category like Covetrus (CVET)?

They continued to bomb out, as the day after PETS beat expectations the CEO of CVET stepped down, causing shares to fall as much as 18% on the day.

Many names which were weak earlier this year have recovered.

  • CVS is trading the like February sell off never happened
  • SKT is up over $4 a share off its lows, which is a huge move for a stock which was trading in the $13s
  • ABBV is up nearly a quarter from its Allergan-acquisition announcement lows
  • WY recently closed at new 52-week highs even after interest rates have recently rose
  • T is up nearly 50% off their last December lows

There seems to be little to no political volatility priced into health companies.

Almost nobody is expecting inflation.

Meanwhile negative rates have caused real estate bubbles, leading cities like Berlin to freeze rent growth:

Berlin’s governing parties struck a deal to freeze rents for five years, marking one of the most radical plans to tackle spiraling housing costs in a major city and hitting the shares of major apartment owners. … The initiative put forward by the Left party’s Katrin Lompscher, head of urban development and housing, is intended to ease the burden on tenants after a property boom caused rents to double over the past decade. The political intervention has spooked investors as a separate campaign attempts to force Berlin’s government to expropriate properties from large landlords.”

One price control to offset another.

Should be sustainable so long as Commerzbank is heavily invested in Slack & Beyond Meat.

If they hurry they might still be able to get in on the WeWork restructure! SoftBank only owns 80% of the firm.

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